New cars shortage hiking second-hand prices

Used cars for sale.
Used cars for sale. Source: Merilin Pärli/ERR

High price and long waiting times for new vehicles have also caused the prices of used cars to soar, which is why it is not rare to see a vehicle that has been driven for a couple of years sold for more than it was worth new.

Priit Ärmpalu, executive manager of used cars dealer Nordauto, told ERR that ordinary second-hand cars for which there is great demand simply cannot be found. A car bought two or three years ago and with 50,000-60,000 kilometers on the clock can today be sold for as much as it set the buyer back new.

"It is the standard situation now," Ärmpalu said, adding that while the price of a new vehicle used to drop by 20 percent as soon as it was driven out of the showroom, used cars now go for more than they were worth new.

While this motivates people to sell existing vehicles, replacing them is tricky due to limited choice. Customers need to compromise when it comes to preferred color, equipment, model year or mileage.

Jussi Pärnpuu, member of the management board of new and used cars dealer Auto 100, said that used car prices have gone up by roughly 20 percent and finding a new car may take a lot of time and effort.

"Because new cars are both more expensive and harder to come by than before, people tend not to sell their existing vehicles on a whim," Pärnpuu explained. "Emotional buying, wanting to try something new was more common, while people tend to hold on to their vehicles longer now. My recommendation is that if you have a good used car, keep it and drive it for longer," he said.

Priit Ärmpalu from Nordauto said Estonians used to switch cars too often, every two or three years, and that both individuals and companies are keeping vehicles longer now.

He said that last year saw a period where prices grew so quickly that one could sell a vehicle bought for €10,000 for €12,000 two months on or a €40,000 vehicle for €45,000 a month after the initial purchase.

Dealers do not forecast prices to come down and suggest the situation could be compared to that on the real estate market.

"Prices are so high that while the number of transactions might start to fall, real estate and car prices will not follow. That would take something more serious, a crash of some sort," Ärmpalu said. "Rather, the current level will be retained. The price of new cars also keeps changing. Let us look at the Skoda Octavia as a popular model. The price of a decently equipped Octavia has climbed from €19,000 to €27,000. The trend is facilitating price advance on the used market."

Volkswagen Passat as currency

Jussi Pärnpuu said that prices have climbed to where they should be as the level used to be very low. There were massive discounts and it affected the used market. All manufacturers have long waiting times now, depending on the complexity of the vehicle.

"A customer might have to wait 10 weeks for a simple vehicle, while that could easily become eight months for something a little more sophisticated. And people are willing to wait," he said.

Nordauto also buys used vehicles from other European countries, while Ärmpalu said that only German premium cars are viable today as ordinary cars such as Skodas or Toyotas are too expensive there. While the Volkswagen Passat used to be one of Nordauto's most popular models, the cars have disappeared from the market and become a currency.

"Estonians liked their price-quality ratio. Volkswagens in general, like the Golf, as well as Skodas and Toyotas. Cars bought in Estonia and with Estonian service history are in short supply, which situation is also not about to change," he offered.

Ärmpalu added that while there are more private ads for Skodas and Toyotas now, people selling their own car tend to ask a high price.

Situation changed forever

Ärmpalu remarked that returning to normality will take years, and it is quite possible the former situation will never come again.

Jussi Pärnpuu said that all manufacturers are facing the same problems but are in different stages of the cycle. The contributing factors are the general chip shortage and the Ukraine war, as the country used to do a lot of subcontracting in the automotive sector, as well as soaring raw material prices. An end to the war would not solve the problem as it constitutes just one piece of the puzzle.

"The real problem is that the world is short on things," Pärnpuu said, adding that finding a solution depends on what one means by that. "If it is a return to 2018, I can tell you that is not going to happen. The result is that things have become more expensive and will stay that way. The situation has changed for good – a paradigm shift if you will."

He added that the green turn is expensive and vehicles' environmental and security requirements completely different from five or six years ago. All of it comes at a price the consumer has to pick up at the end of the day. Change is long-term and global.

Data from the Estonian Vehicle Dealers and Services Association (AMTEL) suggests new car sales dropped 26 percent in April year-over-year.


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Editor: Marcus Turovski

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